Housebuilder Bellway to cut jobs as mortgage rates bite

UK housebuilder Bellway on Wednesday delivered a pessimistic outlook on near-term trading, blaming current “challenging” market conditions on the recent surge in mortgage rates and the end of the Help-to-Buy scheme.

In a trading update ahead of its results for the financial year ended 31 July, the company also announced it was cutting jobs “across the group” following a review. It did not give a figure of how many jobs from its 3,000-strong workforce were at risk

Bellway’s share price was down 2% at 2,176 in early trade.

The company said that higher borrowing costs for buyers resulted in a weaker trading environment throughout June and July, and housing completions are expected to decrease “materially”.

The outlook came as the company reported housing revenue of £3.4bn in the year to 31 July, down 3% year-on-year but in line with previous guidance. Housing completions fell to 10,945, from 11,198 the previous year, while selling prices were 1% lower at £310,000 on average.

Bellway also reported that underlying operating margin would be 16% for the year, down from 18.5% previously, on the back of built cost and overhead inflation, longer building times and the increased use of “targeted sales incentives”.

Bellway’s chief executive Jason Honeyman said: “The backdrop of macroeconomic uncertainty and cost of living pressures affected consumer demand during the year and, given affordability remains constrained by higher mortgage interest rates, underlying trading conditions are likely to remain challenging in the near term.”

The builder is continuing to accelerate the construction of social housing, which it says has partially offset weaker demand in the private sector. The impact of higher rates have hit those requiring a higher loan-to-value mortgage the worst, while the end of Help-to-Buy in March “exacerbated” demand woes.

Overall reservation rates for the period dropped significantly on the previous financial year, falling 28.4% to 156 per week, with the private reservation rate sinking 35.9% to 109 per week.

Meanwhile, the value of its forward order book fell to £1.19bn, down from £2.11bn previously, comprising just 4,411 homes compared to 7,223 last year.